We are pleased to submit this letter in response to the request of the Securities and Exchange Commission (the "Commission") for comments on the implementation of provisions of the Sarbanes-Oxley Act of 2002 (the "Act"), P.L. 107-204, 116 Stat. 745, relating to Section 16(a) of the Securities Exchange Act of 1934, as amended ("Section 16(a)").

Section 403 of the Act amends Section 16(a) to require, effective August 29, 2002, that persons subject to the reporting requirements of Section 16(a) report changes in beneficial ownership by the end of the second business day following the day on which the transaction was executed.

Recommendations

In light of the amendments to Section 16(a) effected by the Act, we respectfully make two recommendations concerning the Commission's rulemaking thereunder:

1. Amend Item 405. We recommend that the Commission amend Item 405 of Regulation S-K, Reg. 17 C.F.R. §229.405 ("Item 405") to provide that registrants will not be required to disclose pursuant to that Item the filing of an amended report under Section 16(a) where all of the following conditions are satisfied: (i) the original report was filed within the deadline applicable under Section 16(a); (ii) the amendment is filed not later than 30 days after the filing of the original report; (iii) neither the amount of securities acquired or disposed of nor the price reflected on the amended report differs by more than 10% from the amount and price indicated on the original report; and (iv) the amended report does not modify the characterization of the transaction reported on as an acquisition or disposition.1

2. Confirm reporting requirements for transactions occurring before August 29, 2002. We also request that the Commission confirm that transactions occurring before August 29, 2002 should be reported in accordance with the current reporting rules under Section 16(a).

Discussion

1. Item 405

Based on our experience, we anticipate that many Section 16(a) filers will encounter difficulties in meeting the accelerated filing deadline and that a significant number of reports will contain errors, notwithstanding the good faith efforts of Section 16(a) filers to comply with the new requirements. Correct information about price and amount of securities may not always available on a timely basis; information about aggregate holdings may need be derived from a variety of sources, not all of which may be readily available or kept up-to-date; deciding on the applicability of a particular transaction code can raise subtle questions that a reporting person may wish to raise with outside counsel. Even under the current reporting regime, in which Form 4 reports are due on the 10th day of the month following that in which the transaction occurred, mistakes occasionally occur. In our view, the incidence of Form 4 reports containing mistakes is likely to increase once the accelerated filing schedule mandated by the Act takes effect.

Under current practice, a Section 16 reporting person who discovers that one of his or her reports contains an error typically will file an amended report setting forth corrected information.2 Assuming that the corrected report is filed after the filing deadline for the original report, Item 405 will generally require the registrant to disclose in its next proxy statement at which directors are elected, and in its next annual report on Form 10-K, that the reporting person failed to file a required report on a timely basis.

We believe that in view of the accelerated filing deadline mandated by the Act, it is appropriate that the Commission revise Item 405 so that proxy statement or annual report disclosure of relatively minor filing errors will not be required where those errors are corrected promptly. We believe that such a revision would in no way impair the clear intention of Congress to require rapid disclosure to the public market of transactions by Section 16 insiders.

In advancing this proposal, we wish to call attention to the multiple purposes of the Section 16(a) reporting system. In line with the general function of Section 16 in preventing insider trading, Section 16(a) reports provide shareholders and their counsel with information to enable them to determine whether a registrant's directors, officers or principal shareholders engaged in transactions that could give rise to liability under Section 16(b). As the Commission has recognized, however, Section 16(a) reports serve another function as well: they provide public investors and financial analysts with information that may be considered relevant to a decision whether to purchase, hold or sell an issuer's securities. See Release 34-26333 (Dec. 2, 1988), 53 F.R. 49997, at Part II. Congress, we believe, had this second purpose in mind in amending Section 16(a) to impose the new filing deadline for transactions occurring on or after August 29, 2002.

Precise information about the amount of securities involved, the applicable price and the nature of the transaction are all necessary to determine potential Section 16(b) liability.3 With respect to giving public investors prompt information concerning purchases and sales by insiders, however, we believe that the general order of magnitude and direction (acquisition or disposition) of the transaction are or primary interest to market participants. Relatively minor errors in reporting the details, promptly corrected, do not compromise the flow of information that Congress determined to encourage and, in our view, should not be required to be disclosed under Item 405.

Our proposal would relieve a registrant from the obligation to make disclosure under Item 405 only if all of the following conditions were met:

(i). The original report must have been filed within the Section 16(a) filing deadline. Item 405 relief would not be available if the original report had been filed late.

(ii). Timely correction. The filing person would be required to file a corrected report within 30 days of the original filing. We believe that 30 days should provide reporting persons sufficient time to gather definitive transaction information and to arrive at a definitive view on reporting details. We believe that an objective deadline (30 days) will be easier to administer than one based on subjective considerations (e.g., promptly following the reporting person's obtaining definitive transaction information).

(iii). Neither the amount of securities acquired or disposed of nor the price reflected on the amended report differs by more than 10% from the amount and price indicated on the original report. Our proposal is intended to provide relief only for relatively minor errors that do not compromise the quality of information that is disclosed to the marketplace during the two business days following a reporting person's transaction. We believe that a deviance of no more than 10% in the number of shares reported as acquired or sold, or in the transaction price, is consistent with this approach. For example, we think that market participants will have received meaningful and useful disclosure if a Form 4 indicates that an insider has sold 500,000 shares of company stock at $10 per share, even if the insider later learns that the total amount sold was 489,000 shares and corrects the Form 4 accordingly. On the other hand, an insider who reports selling 5,000 shares when in fact he sold 500,000 shares has clearly not provided market participants with appropriate disclosure, and his inaccuracy, even if made in good faith and even if corrected, should be reported under Item 405.

(iv). The amended report does not modify the characterization of the transaction reported on as an acquisition or disposition. Probably the single most relevant fact for market participants is to know whether Section 16 insiders are acquiring or disposing of company securities. We accordingly suggest that there should be no Item 405 relief if the amended report changes the characterization of the transaction from acquisition to disposition or vice versa, even if the original error was made in good faith.

The new reporting deadline imposed by Section 403 of the Act becomes effective 30 days after enactment, i.e. on August 29, 2002. In Release 34-46313 (Aug. 6, 2002), the Commission stated that "all transactions executed on or after August 29, 2002" will be subject to the amended two-business day deadline, except where an exemption is available. We respectfully request that the Commission confirm that transactions executed before August 29, 2002 will remain subject to the reporting requirements that currently apply.

We appreciate the opportunity to comment on the implementation of the Act. If the Commission or the Staff has any questions on the foregoing, please call George Spera at 212-848-7636 or Doreen Lilienfeld at 212-848-7171.

Under the current reporting system, Form 5 may also be used to report transactions or holdings that should have been reported during the issuer's fiscal year on a Form 3 or Form 4 but were not reported.

Section 16(b) claims may be brought any time within two years of the date that short-swing profits are realized. Our proposal would in no way impair the flow of information needed for shareholders to bring timely Section 16(b) claims.